Economic growth or social expenditure: what is more effective in decreasing poverty and income inequality in the EU - a panel VAR approach

Ivana Velkovska () and Borce Trenovski
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Ivana Velkovska: Ss. Cyril and Methodius University Skopje, Skopje, Republic of North Macedonia

Public Sector Economics, 2023, vol. 47, issue 1, 111-142

Abstract: Are economic growth and social expenditure effective in decreasing poverty and income inequality in the European Union? We try to provide an answer to this question by using a Panel VAR model for the period from 2010 to 2019, using a sample of 28 European member states plus Norway and Iceland. We find that although both economic growth and social expenditure decrease poverty, economic growth is more effective at decreasing poverty than social expenditure. However, when it comes to income inequality, economic growth seems to increase it, while social expenditure seems to lower it.

Keywords: panel VAR model; poverty; income inequality; economic growth; social expenditure; European Union (search for similar items in EconPapers)
JEL-codes: B55 C23 D6 E62 I32 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ipf:psejou:v:47:y:2023:i:1:p:111-142

DOI: 10.3326/pse.47.1.5

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